P11D Explained: tips for completing your P11D

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Top tips for completing your P11D - what to report

Reporting Christmas parties and functions on P11Ds 

When reporting staff benefits to do with events, remember: 

• HMRC accepts that no taxable benefit arises on an annual event if the cost (including guests) does not exceed £150 a head including VAT 
• The £150 a head limit may apply to more than one function during the year if the total cost of the functions does not exceed £150. For example, if there were three functions in one year costing, say £80, £60 and £40 per head respectively, it would be possible to exempt the first two (as the
• total is under £150) and pay tax on the £40 function 
• If the cost of a single function exceeds £150 per head, an employee will be taxable on the total cost (not just the excess) 
• For the events exemption to apply, it must be a formal annual function, not just, say, an informal drink 
• Informal events such as an externally hosted zoom quiz for staff may fall within the ‘trivial’ benefits rules

Reporting trivial benefits on P11Ds

Trivial benefits costing £50 or less are exempt from tax and NIC, which means there is no need to report qualifying ‘trivial’ benefits on P11D forms. Many employers have started to give small items to staff (for example, at Christmas instead of a staff event), so it is important to make sure that the exemption applies.  

There are four qualifying conditions that must all be met for a trivial benefit to be exempt: 

• The benefit is not cash or a cash voucher 
• The cost of providing the benefit, or in some circumstances the average cost per person of providing the benefit, does not exceed £50 
• The benefit is not provided through a salary sacrifice arrangement or any other contractual obligation, and;
• The benefit is not provided in recognition of particular services performed by the employee in the course of the employment or in anticipation of such services.

The exemption applies equally to benefits provided to the employee or to the employee’s family or household. 

If the employer is a close company, and the benefit is provided to an individual who is a director or other office holder of the company (or to a member of their family or household), the exemption is capped at a total cost of £300 per tax year. If any of these conditions is not met, the benefit is taxed in the normal way, and subject to any other exemptions or allowable deductions and it must be reported on a P11D as appropriate.

P11D reporting for luxury assets 

Owners and directors make use of luxury assets owned by their company, such as holiday homes, boats or classic cars. It is vital to make sure these benefits in kind are reported correctly, as HMRC frequently search for such items during compliance checks. 

P11D Box L: Assets made available to employees without transfer 

This is not the most common type of benefit in kind, so if you have not come across ‘assets made available’ for a while, don’t forget there is a detailed method of calculating the taxable value (cash equivalent) of an asset provided to an employee that is made available for private use.  

You will need a clear description of the asset and the market value (in most cases, cost) when the asset was first applied as an employment-related benefit. This does not apply to land. For land, the rent that might reasonably be expected to be obtained on a letting from year to year is required. Then you will need to know the amount of salary or cash pay foregone by the relevant employee under Optional Remuneration Arrangements rules and any amount made good by the employee or that has suffered a tax deduction. 

Calculating the benefit 

1. Start with the annual cost of the benefit of an asset (but not land): 20% of the market value. For land, the annual cost is the value of rent, and the following steps do not apply.

2. Deduct any amounts for days when the asset is unavailable for private use. This is calculated pro rata and will include: 

• The day before the asset is first available, and the day after the asset is no longer available 
• If for more than 12 hours in any day, days when: 
• The asset is not in a fit condition to use, or 
• An unconnected person has possession of it by way of a lien over the asset, or 
• The asset is used in such a way that is it is not being used by, or at the direction of the employee or director (or their family or household), or 
• A day when the employee or director is obliged to and actually does use the asset in the performance of their duties, and does not use it privately. 
• This means that if on any day there is both private and business use, the ‘unavailable for private use’ rules do not apply. 

3. Where appropriate, apply the sharing rules. Where an asset is available to more than one employee or director (including their respective family and household) for private use at the same time, the benefit is first calculated for each employee and then reduced on a just and reasonable basis so that the combined total for all is no greater than the annual cost of the benefit.

Practical points 

Accommodation, cars and vans are chargeable using special rules and are reported in other sections. 

If assets are not available for private use for specific periods, it will be important to retain detailed records of each period and the reason why the asset was not available. 

No benefit arises on mobile telephones where only one is provided per employee - unless the mobile is provided through an OpRA arrangement. 

How the OpRA rules work

If an employee agrees to a reduction in gross pay in return for their employer providing a benefit of some kind, these are known as Optional Remuneration Arrangements (OpRAs) and there is a prescribed way that the benefit must be valued. This applies to calculations for cash allowances (such as a car allowance), flexible benefit packages with a cash alternative, and standalone salary sacrifice and salary exchange schemes. 

Under the OpRA rules, the taxable figure on benefits for P11D purposes will be based on the higher of: 

• The amount of pay given up by the employee, and 
• The taxable value of the benefit in kind.

This applies to all benefits in kind, including those previously exempt from tax, except for some specific exclusions including:  

• Employer pension contributions 
• Pensions advice, 
• Childcare vouchers and employer-provided childcare, 
• Cycles and cyclists equipment under the Cycle to Work scheme, and 
• Cars with emissions of 75g CO2/km or less.

Note that where a cycle is provided under a Cycle to Work scheme, the requirement to undertake ‘qualifying journeys’ on the cycle is no longer applicable and OpRA exemption can still apply.